Whistleblower gets day in court after 8 years

By MARY DANDO

The Daily News

The Tennessee Supreme Court recently upheld the states whistleblower law sending the case back for trial in Shelby County Circuit Court early next year.

In Ronald M. Guy vs. Mutual of Omaha Insurance Co., the court held Guy cited a well-defined and established public policy as the basis for his retaliatory discharge claim. The court said Guys whistleblowing activity was a substantial factor in Mutuals decision to fire him.

The court concluded the summary judgment sought by Mutual in the Court of Appeals was properly denied in this case and said court costs should be assessed against Mutual.

Guys attorney, Don Donati, said the importance of the case is the state Supreme Court said an individual could proceed under both the common law and state statute.

For Guy, the court stated he had a cause of action under the common law because there was a strong public policy against fraud in the insurance industry, Donati said.

Mutual had been arguing that Tennessee statutes controlled and a case could not be brought under common law. Under common law, the burden of proof was the whistleblowing was one factor, a substantial factor in the discharge, while under the statute it has to be the exclusive factor, he said.

Now, it goes back to the trial court to submit to a jury the issue of whether that was a substantial factor in his discharge, Donati said.

The principal issue in this case was whether the Tennessee Whistleblower Act preempts common law tort of retaliatory discharge when an at-will employee is discharged for reporting illegal or unethical activity.

Guy was employed on an at-will basis as general manager of Mutuals Memphis division office from June 1992 until he was fired in April 1995.

Jerry Mack Roberson, a licensed insurance agent operating in Dyer County, Tenn., applied to become an agent with Mutual in September 1992. While Guy was reviewing the application, Roberson was assigned an agent production number by Mutuals home office in Omaha, Neb.

Both parties continue to dispute whether Mutual officially hired Roberson as a contracted agent.

Roberson made a sales call on Doris Johnson of Dyersburg in December 1992, representing himself as an agent of both Mutual and John Hancock Insurance Co. At the end of their meeting, Johnson decided to purchase an annuity from Mutual.

In payment, she gave Roberson a Tupperware stock certificate for 145 shares, as well as checks made payable to Mutual totaling about $70,000. In return, Roberson gave Johnson a John Hancock sales receipt. He then deposited the checks into his personal bank account.

Early in 1994, Roberson disclosed to Guy he had Johnsons stock certificate and sent it to him. Guy assigned another Mutual agent, Houston Jones, to find out from Johnson whether she still wanted the stock to be sold and the proceeds invested with Mutual.

From Jones reported conversation with Johnson, Guy concluded Roberson had possibly misappropriated some of her money and reported the incident to the Tennessee Department of Commerce and Insurance.

Guy also believed John Hancock could suffer sanctions and he subsequently contacted the companys managing director and informed him of the situation. However, because Guy allegedly had no knowledge Roberson had represented himself as a Mutual agent, Guy did not believe Mutual was in any way involved in the fraud.

Therefore, he did not report the incident to anyone at Mutual until almost eight months later when he first became aware of Mutuals potential involvement in this situation. He reported it to Mutuals law division, Oct. 13, 1994.

Guy received a positive performance evaluation and an increase in salary Nov. 4.

Several days later, Nov. 17, Mutual received a letter from the Tennessee Department of Commerce and Insurance. The department explained because Mutual assigned an agent production number to Roberson and supplied him with materials normally given to all agents of the company, Mutual allowed Roberson to represent himself as a Mutual agent. Therefore, the department required Mutual to reimburse Johnson $67,147 as a result of the money Roberson had misappropriated.

Mutual agreed to make restitution to Johnson, and after further clarification of her total monetary losses, ultimately reimbursed her $63,781, Dec. 16.

Four days later, Mutual reduced Guys salary by half and reduced his bonus income by 25 percent in order to offset the Memphis offices losses from the previous year.

In terminating Guy April 19, 1995, Mutual said his discharge was based on unacceptable performance as demonstrated by failure to use judgment commensurate with the position of general manager.

It is undisputed Mutual never cited Guys reporting of the illegal conduct of Roberson to the state department of commerce and industry as a reason for his termination.

One month after his dismissal, Guy sued the company seeking $5.5 million in compensatory and punitive damages alleging a common law cause of action for retaliatory discharge in violation of Tennessees public policy.

He said before the Roberson incident was made known to Mutual, he received positive performance evaluations and an increase in his salary. However, he alleged, once Mutual learned of his reporting Roberson to the states authorities and that Mutual was being held liable for Robersons illegal conduct, the company waged a campaign of retaliation against him, resulting in his discharge from employment.

Mutual filed a motion for summary judgment July 22, 1997, arguing Guy could not establish a cause of action for retaliatory discharge because he could not prove the sole motivation for his discharge was his reporting of Robersons illegal conduct.

Mutual argued Guys discharge resulted from his critical lack of judgment commensurate with his position as general manager.

The company cited three primary incidents: his poor handling of the sexual harassment claim of one of his female agents against the Memphis district sales manager who was under Guys supervision; his failure to immediately notify Mutual of Robersons fraudulent conduct; and his telephone conversation with Larry Paylor, the father of one of his subordinates who worked for one of Mutuals competitors, in which Guy made several disparaging remarks about Mutuals business operations.

The Shelby County Circuit Court subsequently denied Mutuals motion without stating any reason to support its decision. Mutual then requested permission to seek interlocutory review (intermediate appeal) of the trial courts denial of the motion for summary judgment, which was granted.

The Court of Appeals first held the Tennessee Whistleblower statute preempted common law whistleblower claims. However, the court also held Guy stated a common law claim for retaliatory discharge in violation of public policy, evidenced by a Tennessee public welfare statute intended to protect consumers from unscrupulous acts by insurance agents.

The case then went to the states Supreme Court. Judge William Barker delivered the unanimous opinion of the court, which was filed July 12.

In sum, we hold that section 50-1-304 does not abrogate, but is cumulative to, the common law cause of action for retaliatory discharge when the employee is discharged for reporting illegal or unethical conduct. A spokesman at Mutual of Omahas head office said it was the companys policy not to comment on pending litigation.

The case will be heard in the circuit court March 31. Guy said he feels he has been vindicated even if it has taken a long time.

I think after 8 years and going to the Supreme Court and the findings being in my favor, I think it definitely shows that you must do the right thing and if you do the right thing you will be vindicated, he said.

In todays corporate environment with WorldCom and Enron and all the corporate corruption, someone has to stand up for whats right and say whats right. Because I cooperated with the state department of insurance that company retaliated and it was proven in the Tennessee Supreme Court.

Guy said he believes Mutual will lose in the trial court because there will be 12 jurors who will be able to see exactly what the facts are.

I cant wait. Im very excited. I anticipate its going to be a great week in court, he said.

Sue Pease contributed to this story.